05/22/2012 07:37 EDT | Updated 07/22/2012 05:12 EDT

Greece Must Go -- and Quebec's Students Too

Quebec's unruly students are no different than the Greeks. Both have enjoyed free rides for years, both are being asked to pay their share of the tab and both are refusing to do so.

The backdrop to both situations and many more to come is the Great Markdown, or the irreversible decline in living standards in developed countries due to mismanagement by democracies, debts, demographics and the success of emerging economies.

The second and third mortgages on the world's "rich" nations means tax hikes and spending cuts, in varying degrees. The students and the Greeks are deadbeats, willing to go to any lengths to get out from under their share of the burden. Obviously, the degree of discomfort is wildly variant. The Greeks are going to fall behind the Romanians in living standards in short order while the students are making a fuss over a pittance.

That makes the Quebec students, in a sense, even more irresponsible. They are protesting over inconsequential amounts that few will directly shoulder and that will, even after increases, remain the lowest in Canada. They are spoiled brats, fronted by kids who actually believe their "tuition crisis" is noble. Premier Charest is correct in shutting them down.

The Greeks are also spoiled brats. They have elected for years leaders like those leading Quebec students who are all show and no substance, who believe in the Free Lunch from Germany or whoever else pays for their benefits and who are prepared to go to the wall for their "noble" cause.

But the party called Greece is over and last week's Greek election result has led credible Europeans, such as the editorial board of der Spiegel and officials in Brussels, to openly discuss and quantify the cost of Greece's exit from the Eurozone. The consensus is not only is this inevitable, but desirable.

The European Commission and the European Central Bank are working on scenarios in case Greece has to leave the Eurozone, EU trade commissioner Karel De Gucht told newspapers. "A year and a half ago there maybe was a risk of a domino effect. But today ...a Greek exit does not mean the end of the euro, as some claim."

In fact, exit of Greece will enhance the future success of the Eurozone by lifting the cloud, say Germans. "It would also make the Eurozone more attractive to new members, such as Poland, with its strong economy. Foreign Minister Radoslaw Sikorski has already signaled Warsaw's desire to join the Eurozone," wrote der Spiegel.

Another benefit, which is why Britain is pushing the Eurozone to stay the course, is that the burden of helping the Greeks will shift to the 27 member European Union from the 17-member Eurozone. An EU fund exists to help struggling nations, such as Latvia dipped into, and Greece will do the same if it leaves.

By the way, the decision is being made daily by the Greeks. The election will be a referendum on the Euro, but if Greeks continue the run on their banks and accelerate it, then there will be no choice but to exit.

Greek banks have lost up to 30 percent of their deposits since the trouble began in 2010 and estimates are that wealthy Greeks have already transferred hundreds of billions of Euros to German banks.

The run is the thing and works like this: As deposits are withdrawn, banks cannot borrow to compensate except from the European Central Bank; they have already received $127 billion this way in exchange for collateral but there's no collateral left. The ECB cannot do much more because it is on the hook for Italy and Spain. So the total loss if it leaves is $127 billion to the other 16 Eurozone members.

If Greeks vote the same way, the new regime will have to shut down its borders and banks to prevent euros or assets from leaving; print drachmas and establish an exchange rate from euros to drachmas. Anyone or any business owing large sums in euros will be forced to declare bankruptcy and the country will need martial law.

The IMF estimates a decline in economic output of more than 10 percent for the first year following the return of the drachma. But after that, according to the IMF, the Greek economy will grow even faster than it would without the devaluation. "The turbulence could last one or two years," it said.

Agriculture and tourism will led the economy and imports from other European countries will crater, along with those from the US or China, thus harming their economies too.

The departure of Athens will help the long-term health of the Euro, and Europe, and patience has run out with the dysfunctional Greeks. As one German politician pointed out: "Greece has already received more money than was paid out under the Marshall Plan. The Greeks must treat the measures as an opportunity, or else they don't stand a chance."

This blog originally appeared in the Financial Post.